This invention relates to a novel municipal bond product, a method of making the bonds available to purchasers using a general purpose computer programmed to perform specific functions, and an apparatus which comprises a specific use computer which carries out the various functions needed to process bond-related transactions. The purpose of the invention is to provide a financial instrument that can be sold to property owners for the purpose of protecting the holder from future ad valorem tax increases, and using computer processing technology to enhance the manner and efficiency with which the products are made available to the public.
Through the repurchasing mechanism, the Bond provides the Municipality with a fine level of control on the outstanding debt of the Bond Issue. This reduces the need and cost to perform conventional bond refinancing through a call and reissuing a new municipal bond for the entire amount.
The Bond reacts in the opposite manner from conventional municipal bonds in regards to inflation and interest rates. Where as a conventional bond's value goes down as these rates go up, a Tax Abatement Bond is worth more. Thus the Bond is an excellent method for diversifying a portfolio.
The instrument will be a municipal bond offered and sold by the ad valorem taxing authority with a coupon designed to service the ad valorem tax at the current levels for as long as the holder owns the house and the bond. Depending upon the local law, it would either contain an express tax abatement provision for the property or a mandatory yield increase matching future inflation in the ad valorem tax rate.
While the following disclosure describes bonds designed for homeowners, the concept is applicable for all real estate that is taxed by a municipal authority. The variations from type of real estate and the changes in wording of a particular bond does not preclude these variances from carrying out the concept or permitting the entire group of bonds to fall within this patent application.